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The Low Incomes Tax Reform Group has issued a guide to enable taxpayers to check whether they have underpaid or overpaid tax in the 2012-13 tax year and take action.

Background

HMRC have started the PAYE reconciliations process for 2012-13, which will generate refunds or underpayments for taxpayers in receipt of a calculation – a ‘P800’. HMRC expect this automated process to be completed by the end of October 2013. Some of these PAYE tax calculations will now have hit taxpayers’ doormats and could be causing concern.

Anyone who receives one, be it a refund or a notification that HMRC believe extra tax is owed, should be proactive in checking it. Reconciliations are not necessarily caused by errors in the system. However, in a limited number of cases, errors could have been made, which may give cause for challenging the calculations. Individuals are advised to review their circumstances carefully, with the help of a tax professional if necessary.

LITRG guidance

LITRG’s full guide is available to help with this and can be accessed via this link:

The guide includes:

• How to check the calculation
• Examples of the letters taxpayers could write in response to receipt of a tax calculation
• A guide to ESC A19, an Extra-Statutory Concession under which HMRC will sometimes write off arrears of tax
• A guide to when HMRC should investigate whether someone’s employer or pension payer should be asked to pay tax arrears rather than them
• A guide to when someone can challenge an underpayment shown on a PAYE tax calculation where they feel HMRC have given them misleading or incorrect information or advice.

ESC A19

Crucially, if taxpayers are claiming that ESC A19 applies, they should not be tempted to pay off any PAYE underpayment before their application has been considered. If they do clear it, HMRC will claim that there are no longer any arrears in respect of which ESC A19 can apply, and refuse to consider the concession. If taxpayers do decide to pay something towards the arrears, they must make sure HMRC know that it is a payment on account and made without prejudice to the A19 claim.

Conclusion

Calculations should be checked and action taken relevant to the individual circumstances, as taxpayers could be missing out on claims. If people do owe tax, they should investigate their payment options. Those on low incomes should check whether any tax they may have to pay has any effect on their entitlement to means-tested benefits and they should tell HMRC as soon as possible if paying tax is likely to cause severe hardship.